Australian Stock Market Report – Afternoon 7/3/2012

AFTERNOON REPORT
(5pm AEST)

Investors gave a muted response to the Reserve Bank of Australia's decision today to leave the official cash rate on hold at 3.5pct, as expected. There was virtually no reaction on the stock market when the decision was handed down at 2.30pm AEST, with stocks closing slightly lower following yesterday's strong rally and a mixed finish on Wall Street overnight. The All Ordinaries Index (XAO) finished the session down 6.1pts or 0.2pct to 4166.4.

The Reserve Bank Board today left the official cash rate on hold at 3.5pct. The cash rate is at the lowest level in two and a half years (December 2009). The next RBA Board meeting is on August 5 2012.

Financial stocks were generally weaker despite solid moves in the European STOXX 600 Banking Index overnight, on speculation the European Central Bank will cut interest rates by 25 basis points at its meeting on Thursday. Locally, shares in the ANZ (ANZ) Bank fell 0.4pct to $22.26 while Macquarie Group (MQG) was down 0.3pct to $26.71.

Energy stocks also pulled back, in response to a weaker oil price and after some significant gains yesterday. Shares in Santos (STO) fell 1.9pct to $10.70 while Woodside Petroleum (WPL) was lower by 1.8pct to $31.25.

David Jones (DJS) shares closed steady today at $2.33 after yesterday's dramatic 10pct drop in the wake of a bungled takeover bid for the upmarket retailer. The corporate watchdog is set to investigate the $1.65 billion mystery takeover offer David Jones received from an obscure UK private equity firm.
The Australian Securities and Investments Commission (ASIC) has been monitoring developments since the offer from EB Private Equity was made public on June 29 and then bizarrely withdrawn yesterday. David Jones shares surged on the bid on Friday then plummeted yesterday. Shares in rival Myer Limited (MYR) added 2.5pct today to close at $1.675 while outdoor retailer Kathmandu (KMD) added almost 5pct to close at $1.07.

Elsewhere today, shares in casino operator Echo Entertainment Group (EGP) added 1pct to $4.30. The NSW Independent Liquor and Gaming Authority and the Queensland government today granted approval for Perpetual Investment Management (PPT) to increase its potential maximum voting power in Echo from 10pct to 15pct, raising the possibility other stakeholders may be able to do the same. PPT shares today rose 3.2pct to $23.38.

Economic data released today showed a sharp rebound in building approvals in May. Dwelling approvals rose by 27.3pct following a 7.6pct slide in April. The value of building approvals rose 43.4pct in May to be up 23.2pct on a year ago. However CommSec Economist Savanth Sebastian said the figures need to be taken with a grain of salt. "The Reserve Bank is unlikely to get overly excited by the latest improvement in building approvals. The central bank is likely to be more focussed on the global economy and the downside risks to global growth. Ongoing weakness in China and the euro zone is likely to prompt further action in coming months. CommSec has pencilled in the next rate cut to take place in August after the next round of inflation data."

On the market overall, a total of 1.18 billion shares were traded, worth $3.39 billion. 448 were up, 441 were down and 337 were unchanged.

At 5pm AEST on the ASX24, the share price index was at 4096, down 2pts. The Aussie dollar was buying US102.64c, £0.6539 and €81.54c.

Ahead tonight, factory orders and total vehicle sales numbers are released in the US.

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